WWF files court proceedings against government department
over Sakhalin II oil-and-gas project

Summary

On 15 August 2007, WWF and The Corner House filed for a judicial review of the decision by the UK Government's Export Credits Guarantee Department (ECGD) to support Sakhalin II oil-and-gas project off the far eastern coast of Russia.

Under the Freedom of Information Act, The Corner House obtained a letter written by ECGD to the Bermuda-registered Sakhalin Energy Investment Company (SEIC) on 4 March 2004. The letter confirms that ECGD has approved conditional financial support for $650 million of contracts for two British sub-contractors of SEIC (with interest, the amount of public money at risk amounts to $1 billion according to ECGD's figures). (Until December 2006, Royal Dutch Shell was the majority shareholder of SEIC, but has since sold most of its holdings in the company to the Russian state-owned Gazprom.)

Despite the March 2004 letter, the then Department of Trade and Industry government minister, Mike O'Brien, subsequently told Parliament that no decision on ECGD support had been taken, a position that the ECGD still maintains.

In correspondence with Friends of the Earth UK, ECGD has since confirmed that its March 2004 conditional decision on Sakhalin is legally-binding. The decision thus conflicts with ECGD's stated policy to give preliminary indications of support "entirely without commitment".

The ECGD's promise of support, moreover, was made before assessing the environmental and social impacts arising from Sakhalin II, whereas its own policy stipulates that support can be given only after such assessments have been made.

The oil-and-gas project threatens the critically endangered Pacific Gray Whale, salmon fisheries, internationally-important wetlands and migratory bird habitats. Local communities have been adversely affected without having been consulted or provided with adequate compensation.

Although the ECGD states that its support is conditional upon being reassured as to these impacts, it is now impossible to mitigate many of them since the Sakhalin II oil-and-gas project has already been substantially constructed.

PRESS RELEASE

WWF files court proceedings against government department

Wednesday 15 August 2007

WWF has today filed court proceedings [1] against a British Government department to expose operations that undermine the UK's 'ethical foreign policy' and are seriously damaging the environment.

WWF, in partnership with environmental and social justice organisation The Corner House, has filed the case against the Export Credits Guarantee Department (ECGD) -- the government department charged with facilitating British business abroad.

This follows the discovery, through a Freedom of Information (FoI) request, that ECGD had committed to underwriting $1bn of contracts for the Sakhalin Energy Investment Company (SEIC) -- despite three years of assurances to the British public that this decision was still being considered.

SEIC is a Bermuda registered company responsible for Sakhalin II, a major oil and gas development in Russia. The Sakhalin II project, which is in fact almost completed, has already caused serious environmental damage and threatens the extinction of the Western Pacific gray whale.

In a letter from ECGD to SEIC dated 4 March 2004 [2], which WWF received as part of the FoI request, ECGD gave a legally-binding commitment to support Sakhalin II subject to certain conditions being met.

But the very next day (March 5 2004), Department of Trade and Industry (DTI) minister Mike O'Brien told parliament that no decision had been made. "ECGD is awaiting further information on this issue and will want to be sure that the potential impact on the Western gray whales is minimised. I am aware of the range of issues to which this project gives rise and I will approve support only if I am satisfied that these have been addressed," he said.

Almost $1 billion of UK taxpayers' money would be at risk from ECGD's support for the project.

James Leaton, WWF-UK's Oil and Gas Policy Adviser, said:

"ECGD's support for the Sakhalin II project effectively gave the backing of the UK government to an environmental catastrophe. ECGD has paid lip-service to the environment, but shows no intention of taking concrete action to prevent damage caused by the projects it backs. Supporting this project shows no coherence across the UK government on protecting biodiversity or tackling climate change."

Nick Hildyard, a co-director of The Corner House, said:

"ECGD has broken its own policies. It says that it only gives a commitment to support after it has assessed the environmental impacts of a project. But, in this case, it gave a legally-binding promise before getting assurances on the environment. It is impossible now to address many of those impacts, since the work has already been done. ECGD must not be allowed to offer UK government money willy-nilly to environmentally damaging business ventures benefiting foreign countries."

1. Documents comprise:
   • WWF and Corner House Research vs Secretary of State for Business, Enterprise and Regulatory Reform.
   • Witness Statement of Nicholas Hildyard, The Corner House
   • Witness Statement of James Leaton, WWF-UK
2. Letter from ECGD to the Sakhalin Energy Investment Company (SEIC), 4 March 2004, released under Freedom of Information request.

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